The only way I can see any logic in this is if one or more of these situations applies:
The market is one of those low-dollar markets where homes are selling in the under $200k prices to begin with. At that point the loss wouldn’t be very many dollars.
The lender is a portfolio lender in a relatively small town and they’re too exposed in the community to allow foreclosure cycle to start. In essence, they think that if they don’t foreclose on the first one they might be able to avoid the chain reaction long enough for the pricing trends to recover.
The bank’s management has been listening to an economist who parrots the NAR party line and they actually think this is a short term blip rather than a long term decline.
No matter how you slice it, this is a risky move at best. It can only work for them if the soft landing occurs. And soon.
